In his hugely successful career, everything Mohsin Issa has touched has turned to gold – until, that is, he bought Asda. Now the harder he works and the more involved he becomes in turning the business around, the further it seems to drift into the doldrums, writes Hugh Radojev
The straight-talking retail veteran Lord Stuart Rose’s intervention in The Sunday Telegraph turned what had already been a bad week at Asda House into an even worse one.
Asda had been busy dealing with the fallout from the disappointing set of quarterly results published last Thursday. In the second quarter, Asda had conspired – despite falling inflation, an economic recovery of sorts in the UK and the much-feted summer of sport – to deliver slumping total revenues and like-for-like sales.
While the supermarket giant tried to put a positive spin on things by noting that online sales were improving and that George had had its “best start” to a back-to-school campaign ever, the topline figures told a stark story of underperformance.
That narrative has only been reinforced today by the latest Kantar market share data. Year on year, Asda’s total market share has slipped by more than a percentage point to 12.7%.
In a bid to turn the tide, Asda unveiled what it called a “clear and decisive plan” to deliver more consistent results for the second half of the year, with a renewed focus on three key areas: customer satisfaction, enhanced product availability and a renewed trading plan.
Chief financial officer Michael Gleeson was wheeled out to sell the new plan to the press.
No, he said, we’re not happy with how things are going. Yes, he insisted, this plan will work. When one colleague in the press pack pointed out that the three new focuses were surely little more than “the fundamental basics of retailing”, Gleeson seemed to tacitly agree.
“From time to time, it’s the right thing to do to stand back and reassess,” he said. “That’s a completely normal thing to do”.
So, back to basics it is for Asda on the shop floor. But what about in the boardroom?
“No CEO candidate with the experience required for this level of job would be willing to do it having Mohsin breathing down their neck every day”
- Source close to Asda
That brings us back to Sunday, and the totemic figure of Lord Stuart Rose. He admitted to being “slightly embarrassed” by Asda’s latest financials, but he was only getting started.
On the topic of Asda’s co-owner Mohsin Issa, Rose said in no uncertain terms that he should relinquish control of the day-to-day running of the business.
“I wouldn’t encourage him to [intervene in operations] and I am the chairman,” he said.
“We always said Mohsin was a particular horse for a particular course. He is a disruptor, an entrepreneur, he is an agitator.
“We’ve added a significant number of stores and we’ve changed a lot, but it now needs a different animal. In the nicest possible way, Mohsin’s work is largely complete.”
Reading between the lines, it seems for all the world that Rose – one of retail’s shrewdest and most experienced operators – can see the writing is on the wall for him at Asda and is looking to shape the narrative to cast him in a better light ahead of potentially looking for another job.
Whatever the reasons behind Rose’s intervention, they lay bare a problem that has been simmering under the surface at Asda for a long time.
It’s three years this month since Asda’s last chief executive, Roger Burnley, stepped down from the role. Three years one of the UK’s largest retailers has been without a chief executive.
While Asda has been publicly on the hunt for a CEO since the beginning of the year, sources close to the business say Mohsin Issa is hampering that search in more ways than one.
“Mohsin can’t help himself but be a micro-manager. No candidate with the experience required for this level of job would be willing to do it having Mohsin breathing down their neck every day,” said one.
“So, they can’t seriously begin the search until either Mohsin agrees to ease off, or steps away completely. But Mohsin won’t be able to step away, unless there’s someone in the door who he thinks can run the business”.
“TDR has already bought out one Issa brother this year. Buying out the other’s share might be the easiest way to deal with the current impasse”
Call it the Mohsin Paradox, and from what I understand, majority owner TDR Capital is becoming increasingly frustrated by it. The private equity firm knows full well things need to change, but seems unable or unwilling to do anything about it.
Quite how it approaches this Gordian knot remains to be seen, but perhaps TDR would do well to follow Alexander the Great’s ancient example by simply cutting through it. TDR has already bought out one Issa brother this year. Buying out the other’s share might be the easiest way to deal with the current impasse.
Such a move wouldn’t come without its risks. With the chair of its biggest retail investment seemingly already manoeuvring for the door, shoving Asda’s de facto chief executive out alongside him would only bring TDR more uncertainty and pain – at least in the short term.
While things at Asda aren’t great, they aren’t yet disastrous either. Perhaps the new turnaround strategy will work and in six months’ time results will have improved and the temperature will have been turned down enough for more considered decisions.
Now may not be time to push the panic button. But, as Asda seeks to turn the ship around, it’s becoming abundantly clear that Mohsin needs to relinquish his grip to allow a new hand on the tiller.
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